MARC Ratings has affirmed its short-term rating of MARC-2IS on Bina Darulaman Berhad’s (BDB) RM100.0 million Islamic Commercial Papers (ICP) Programme.
The rating incorporates BDB’s strength in undertaking construction and property projects, improving leverage position, and adequate liquidity to meet short-term operational and financial commitments. The rating also considers the group’s status as a Kedah state-owned entity, which places it in a good position to secure state construction contracts. These factors are moderated by the group’s modest business profile, characterised by short-term construction projects which are mostly located in Kedah.
BDB’s performance is expected to be supported by an outstanding construction order book of RM636 million as at end-June 2023. This includes the RM392 million water treatment plant upgrading project in Pelubang, Kedah, that is expected to be completed in 2025. In May 2023, the group was also awarded a renewal of a three-year state road maintenance contract worth RM204 million, to run from 2023 to 2026. The renewal of the contract demonstrates BDB’s healthy track record and strong relationship with the Kedah state government. The rating agency expects strong support from the state government to continue.
MARC Ratings notes that BDB is strengthening its presence in Kedah, particularly in Langkawi. In August 2023, it acquired a granite quarry in Langkawi for RM13 million and will launch a new township on the island by end-2023 with a gross development value (GDV) estimated at RM60.7 million. BDB’s ongoing property development projects have a modest total GDV of RM102.6 million with a take-up rate of 90%. Inventory level was low at RM1.0 million as at end-March 2023 (end-2021: RM8.3 million).
For 1H2023, BDB recorded pre-tax loss of RM10.9 million on marginally lower revenue of RM81.5 million (1H2022: negative RM4.9 million; RM83.1 million). The loss was mainly due to higher material and labour costs. Nevertheless, leverage position has improved with borrowings reducing to RM80.3 million in 1H2023 (2022: RM91.5 million). This translated to a low debt-to-equity ratio of 0.17x. Unencumbered cash balance of RM46.2 million is sufficient to meet its near-term borrowing obligations. There is no outstanding issuance under the ICP programme which will expire on June 21, 2024.